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Corporate Governance, Relationship Lending and Monetary Policy: Firm-Level Evidence for the Euro Area

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  • L. de Haan
  • E. Sterken

Abstract

We show by means of a bank relationship model that after monetary policy tightening, public firms (having easier access to public capital markets) are more likely to decrease their demand for bank loans than private firms (which are typically more dependent on bank credit and benefit more from relationship lending). This `relationship lending' hypothesis is opposite to the `credit view' that holds that bank dependent firms are hit more strongly by credit rationing after monetary tightening. Next, we empirically test both hypotheses against each other. Our estimation results, based on a sample of around 22,000 firms in the euro area plus the UK during most of the 1990s, yield evidence in favour of the relationship lending hypothesis, particularly for private and small firms.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 708.

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Date of creation: 2002
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Handle: RePEc:dnb:wormem:708

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Keywords: Corporate governance; Credit view; Relationship lending; Monetary policy;

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Cited by:
  1. Patrick Lünnemann & Thomas Mathä, 2002. "Monetary transmission: empirical evidence from Luxembourg firm-level data," BCL working papers 5, Central Bank of Luxembourg.
  2. Eleni Angelopoulou & Heather D. Gibson, 2007. "The Balance Sheet Channel of Monetary Policy Transmission: Evidence from the UK," Working Papers 53, Bank of Greece.
  3. I. Arnold & C.J.M. Kool & K. Raabe, 2011. "Industry Effects of Bank Lending in Germany," Working Papers 11-21, Utrecht School of Economics.
  4. Leo De Haan & Elmer Sterken, 2006. "The impact of monetary policy on the financing behaviour of firms in the Euro area and the UK," The European Journal of Finance, Taylor & Francis Journals, vol. 12(5), pages 401-420.
  5. Kazuo Ogawa & Elmer Sterken & Ichiro Tokutsu, 2013. "The trade credit channel revisited: evidence from micro data of Japanese small firms," Small Business Economics, Springer, vol. 40(1), pages 101-118, January.
  6. Martinez-Carrascal, Carmen & Ferrando, Annalisa, 2008. "The impact of financial position on investment: an anlysis for non-financial corporations in the euro area," Working Paper Series 0943, European Central Bank.
  7. Carmen Martínez-Carrascal & Annalisa Ferrando, 2008. "The impact of financial position on investment: an analysis for non-financial corporations in the euro area," Banco de Espa�a Working Papers 0820, Banco de Espa�a.

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